by
Co-Head of Real Asset Strategy

Analysis and outlook for the real assets market

  • Gold in recent decades has largely been bought as a store of value (jewelry, bars, coins), and not necessarily as money (Central Bank reserves).

What it may mean for investors

  • Gold holds a place in most investors' portfolios, most of the time.
  • As with other investments, timing and position sizes are key.

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Who Owns Gold

Today, we'll discuss who owns the world's gold, and where it comes from. According to Chart 1, the earth has yielded about 175,000 tonnes of gold in history. Now, precisely where that gold sits today is tricky to understand because of gold's uniqueness, which was discussed yesterday. Gold's density allows great wealth to easily cross borders, making it tough to track. Adding to the tracking complications, gold is easily reshaped, and a little bit of gold stretches a long way. As an example, one ounce of gold can be pounded into wire form that could stretch for 50 miles. 

Chart 1. Gold Above Ground


Chart of total amount of gold mined (in metric tons) every year since 1900. Contact your Relationship Manager for more information.

Sources: Bloomberg, U.S. Geological Survey (USGS), Wells Fargo Investment Institute, 2/17/17. Yearly Data: 1900 - 2015. 2015 data includes estimates from USGS. Dates selected to show modern growth of gold above ground.

Overall Gold Demand

In the end, gold's uniqueness makes it difficult to trace all of the world's gold, and where it sits as of 2017. That said there are some sources that do a decent job of following current demand flows. Table 1 is a breakdown of yearly demand for five types of buyers: 1) Jewelry, 2) Bars and Coins, 3) Exchange Traded Products (ETPs), 4) Technology, and 5) Central Banks. As you can see in the "Total" column to the far right, gold demand has continued to ratchet-up in recent years even as gold prices have fallen 35 percent from its 2011 peak (Table 1, yellow highlight). 

Before we leave Table 1, please note that the majority of demand comes from Jewelry and Bars and Coins. These are what could be called consumer "store of wealth" buyers versus a Central Bank, which could be classified as a "gold as money" buyer. The point being that gold in recent decades has largely been bought as a store of value (jewelry, bars, coins), and not necessarily as money (Central Bank reserves).

Table 1. Historical Demand for Gold by Source (Metric Tons)


Table of sources of historical demand for gold. Contact your Relationship Manager for more information.

Source: Metals Focus; ICE Benchmark Administration; World Gold Council, Wells Fargo Investment Institute, 2/17/17.

Central Bank Demand

Infographic of top gold holders in the world: USA, Germany, and Italy. Source: World Gold Council, 2017. Contact your Relationship Manager for more information.

Central Banks, while not the dominant gold buyers, increased their demand for gold in recent years. But to be clear, this demand is not coming from the traditional western Central Banks (Table 2, yellow highlight). This can be seen in Table 2, which highlights the top Central Bank holders of gold.

Table 2. Top Six Central Bank Holders (Metric Tons)


Table of the top six central bank holders of gold (in metric tons). Contact your Relationship Manager for more information.

Sources: World Gold Council, Wells Fargo Investment Institute, 2/17/17. Data as of February 2017.

ETP Gold Demand

Infographic of exchange traded products (ETPs) gold holdings. Contact your Relationship Manager for more information. Source: Respective ETP providers, Bloomberg, ICE Benchmark Administration, World Gold Council.

Chart 2 shows global ETP gold holdings by region.  As of the third quarter of 2016, 95 percent of ETP gold holdings were listed in North America and Europe. As such, swings in ETP demand are largely driven by these markets.

Chart 2. ETP Gold Holdings by Region (metric tons)


Chart of exchange traded products (ETPs) gold holdings by region, in metric tons (North America: 1,340, Europe: 877, Asia: 70, Other: 49). Contact your Relationship Manager for more information.

Source: Respective ETP providers, Bloomberg, ICE Benchmark Administration, World Gold Council, Wells Fargo Investment Institute, 2/17/17. Data as of 9/30/16.

Consumer Demand (Jewelry, Bars and Coins)

Infographic of top gold consumers in the world: China, India, USA. Source: World Gold Council, 2015. Contact your Relationship Manager for more information.

Overall consumer demand (jewelry, bars, coins, etc.) is driven to a significant extent by India and China, shown by the yellow highlight in Table 3. An interesting side note is that the U.S. is the third largest country buyer in the world. We say "interesting" because we do ask investors this question on occasion, and rarely does anyone guess that the U.S. is in the top three.

Table 3. Consumer Demand in Selected Countries (Metric Tons)


Table of consumer demand by country or region in metric tons. Contact your Relationship Manager for more information.

Source: Metals Focus; World Gold Council, Wells Fargo Investment Institute, 2/17/17. Data for year 2016. Americas' demand includes demand from the United States.

India was historically the largest gold buyer, but it has been surpassed by China in recent years. Some of this was due to shrinking Indian demand, but increased demand from a rising Chinese middle class accounted for most of the change. Chart 3 shows gold imports flowing from Hong Kong into mainland China. Mainland China is now importing about 1000 tonnes of gold on a yearly basis. This is staggering considering that the yearly import number was consistently less than 200 tonnes prior to 2012. For added perspective, world mine production in 2015 was approximately 3000 tonnes. Effectively, the Chinese are importing about one-third of the world's annual mine production.

Many see Chart 3 and immediately jump to the conclusion that gold prices are soon set to spike higher, as Chinese demand continues to rise. This may very well be the case in the coming years. We'll certainly be watching Chart 3 with great interest. But keep in mind that there hasn't been a direct connection between gold prices and Chinese buying—not yet anyway. The extra buying since 2011 largely happened as gold prices were falling.

Chart 3. China Gold Imports–Gross vs. Net


Graphs of Chinese gold gross and net imports (in metric tons) and 12-month percentage change since 2010. Contact your Relationship Manager for more information.

Sources: Hong Kong Census & Statistics Department, Bloomberg, Wells Fargo Investment Institute, 2/17/17. Monthly Data: 1/31/2010 - 12/31/2016. Dates selected to show China's recent rapid increase of gold imports. 

Gold Supply

Global gold supplies can be separated into two main categories: 1) mine supply, and 2) recycled gold (Table 4, yellow highlight). In 2015, approximately three-fourth of overall supply came from mines, which is close to the historical yearly norm.

Table 4. Gold Supply by Source (Metric Tons)


Table of gold supply by source for 2014, 2015, and 2016. Contact your Relationship Manager for more information.

Source: Metals Focus; GFMS, Thomson Reuters; ICE Benchmark Administration; World Gold Council, Wells Fargo Investment Institute, 2/17/17.


Infographic of top gold producers in the world: China, Australia, and Russia. Source: USGS, 2014. Wells fargo Advisors, 2017. Contact your Relationship Manager for more information.

On a country basis, the top six gold suppliers are China, Australia, Russia, the U.S., Canada, and Peru. Notice that the largest producers are not necessarily those countries with the largest reserves (Table 5, yellow highlight).

That is it for today. Tomorrow we'll address how gold has performed historically under different investment scenarios.

Table 5. Supply and Reserves by Country (Metric Tons)


Table of supply and reserves by country (in metric tons). Contact your Relationship Manager for more information.

Sources: U.S. Geological Survey (USGS), Wells Fargo Investment Institute, 2/17/17. 2015 figures are estimates from USGS.

image of gold bars

Next in the "Focus on Gold" series:

How Gold Behaves